Plaintiff Rhonda Williams has always lived in Tampa, Florida, about three miles away from the defendant’s fertilizer plant. She suffers from pulmonary hypertension, diabetes, and other health conditions, as well as side effects from treatment of those conditions, and she alleged in her state-court complaint that emissions from the defendant’s plant caused, contributed to, or exacerbated her health problems. She relied on the report of Dr. Mink, a toxicologist, to establish general and specific causation, and she offered her own testimony that her house had “no present value” because of the presence of pollutants emitted from the plant.

The defendant removed the case to federal court and later moved to exclude Dr. Mink’s testimony and the plaintiff’s valuation testimony, and for summary judgment. The district court, without conducting a Daubert hearing, granted all three of the motions.

The Eleventh Circuit, in an opinion written by Judge Tjoflat and joined by Judge Rosenbaum and Judge Ungaro visiting from the Southern District of Florida, affirmed. As to the exclusion of Dr. Mink’s testimony, the court noted both the district court’s “gatekeeper” responsibility under Daubert and Kumho’s reminder that “[t]he trial judge must have considerable leeway in deciding in a particular case how to go about determining whether particular expert testimony is reliable.” The court also highlighted the district court’s comprehensive analysis of the proffered testimony and its identification of “multiple defects” in Mink’s testimony.

Those defects, the court continued, including Mink’s “failure to properly assess dose-response. . . [which] is the hallmark of basic toxicology.” Mink did not perform a dose calculation specific to the plaintiff, and the studies on which he claimed to have relied reported that fertilizer plants made a “minor contribution” to the ambient levels of the chemicals at issue and thus contradicted Mink’s opinions. And even if Mink had come up with sound dosage estimates, “he failed to demonstrate a scientific basis for concluding that those exposure levels would likely produce, contribute to, or exacerbate” the plaintiff’s conditions. Mink cited past measurements showing that the plant’s emissions exceeded the National Ambient Air Quality Standard (“NAAQS”) set by the EPA, but failed to account for the fact that those standards serve a different purpose than dose-response calculations: “regulatory standards often build in considerable cushion[.]” Thus even though the court “ha[s] never required an expert to ‘give precise numbers about a dose-response relationship,’” the district court did not err in finding Mink’s consideration of dose-response insufficient.

The court also noted Mink’s failure to rule out other potential causes for plaintiff’s health problems—his deposition testimony that the probability of other causes was “low,” without identification of any scientific basis for that opinion, was insufficient—and his failure to consider the background risk of the health problems at issue. “Dr. Mink failed to meaningfully address other potential causes of Ms. Williams’ conditions or even the background risk of those conditions. This fundamental methodological failure undermined the soundness of his causation opinions, and the District Court was therefore right to exclude those opinions as unsound.”

The court also affirmed the exclusion of plaintiff’s testimony that her house had “no present value” because of its proximity to the defendant’s plant. While the owner of property is generally competent to testify as to its value, the plaintiff’s testimony in this case, offered without any foundation (testimony about appraisals or attempted sale, for instance) and in the face of contradictory evidence (establishing recent sales in the neighborhood) was “pure speculation.”

Plaintiff Ricardo Devengoechea, a citizen of the United States and Florida resident, inherited a collection of documents and artifacts which had belonged to Simón Bolívar. According to the plaintiff’s complaint against Venezuela, Venezuelan officials, including the Coordinator General of the Office of the Vice President of Venezuela, contacted him in 2007 about a potential purchase of the collection, which was at the plaintiff’s Florida home. The officials visited Florida, examined the collection there, and assisted the plaintiff in renewing his passport so that he could bring the collection to Venezuela for further inspection. At the officials’ invitation, the plaintiff and the collection traveled to Venezuela on a private jet; the officials also paid for the plaintiff to return to Florida, and then fly back to Venezuela, with some additional items. Throughout these meetings, the plaintiff claimed, he and the Venezuelan officials were negotiating a potential sale of the collection to Venezuela.

In late 2007 the plaintiff returned to Florida but left the collection in Venezuela for further examination. According to his complaint, Venezuela officials told him that they would contact him about the purchase after the collection had been examined by experts, and he left the country on that understanding. But by 2010 Venezuela had neither purchased nor returned the collection to the plaintiff. At that point, the plaintiff filed a complaint against Venezuela in the United States District Court for the Southern District of Florida, alleging breach of agreement and unjust enrichment and invoking the court’s jurisdiction under all three clauses of the FSIA’s commercial-activity exception. Venezuela moved to dismiss, claiming lack of subject-matter jurisdiction and failure to state a claim. The district court denied the motion, finding that the FSIA’s “commercial activity” exception to sovereign immunity applied to confer jurisdiction and that the complaint sufficiently stated claims against Venezuela.

The Eleventh Circuit, in an opinion written by Judge Rosenbaum and joined by Judges Martin and William Pryor, affirmed. The court began its analysis by noting that the FSIA “renders foreign states immune from the jurisdiction of United States Courts unless one of its statutory exceptions applies to the plaintiff’s claim.” One of those, the “commercial-activity exception,” provides jurisdiction over a foreign state when:

the action is based [1] upon a commercial activity carried on in the United States by the foreign state; or [2] upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or [3] upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.

28 U.S.C. § 1605(a)(2). “Commercial activity,” in turn, is “either a regular course of commercial conduct or a particular commercial transaction or act.” Id. § 1603(d). And “commercial” has the same meaning under the FSIA as it did before the FSIA was enacted, when the State Department generally applied a “restrictive” theory of sovereign immunity, according to which “the sovereign immunity of foreign states should be ‘restricted’ to cases involving acts of a foreign state which are sovereign or governmental in nature, as opposed to acts which are either commercial in nature or those which private persons normally perform.” (Slip Op. at 12 (quoting H.R. Rep. No. 94-1487).)

Venezuela, the court held, did not seize the Bolívar collection through its sovereign powers; it negotiated a potential sale “like a private buyer could do.” Devengoechea’s claims were “based upon” that commercial activity, as required by the FSIA, because “[t]he conduct that actually injured Devengoechea—and therefore that makes up the gravamen of Devengoechea’s lawsuit—is Venezuela’s failure to return the Bolívar Collection to Devengoechea or to pay him for it.” And the acts complained of had a “direct effect in the United States” because the complaint alleged an agreement requiring payment or return of the collection, either of which would have occurred in the United States. So the FSIA’s commercial-activity exception to sovereign immunity applied, conferring subject-matter jurisdiction over Devengoechea’s claims.

The court also affirmed the denial of Venezuela’s Rule 12(b)(6) motion to dismiss, rejecting the argument that the complaint failed sufficiently to allege action by Venezuela itself. The court found the complaint’s allegations about Venezuela’s “representatives” and “officials,” including the assistance given for the plaintiff’s passport renewal and transportation to and from Venezuela, were sufficient to allege apparent or actual authority to act for Venezuela.

]]>Bank Did Not Waive Arbitration Rights Against Unnamed Class Membershttps://www.11thCircuitBusinessBlog.com/2018/05/bank-did-not-waive-arbitration-rights-against-unnamed-class-members/
Mon, 14 May 2018 19:05:14 +0000https://www.11thCircuitBusinessBlog.com/?p=1586In the latest appeal emanating from the Checking Account Overdraft Litigation MDL proceeding pending in the Southern District of Florida, the Eleventh Circuit returned to a question that it dodged in a previous appeal: whether Wells Fargo waived its arbitration rights as to unnamed members of a certified class. Gutierrezv. Wells Fargo Bank, NA, No. 16-16820 (11th Cir. May 10, 2018).

Early on in the underlying litigation, consolidated class-action challenges to overdraft fees, Wells Fargo had decided not to file a motion to compel arbitration as to the named class representatives. Instead, Wells Fargo joined a motion to dismiss while stating that it reserved its arbitration rights against unnamed class members in the event of class certification. In later answering the complaints, Wells Fargo asserted its arbitration rights as a defense. After the Federal Arbitration Act preemption decision in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), Wells Fargo reconsidered, and moved to compel the named class representatives to arbitrate their claims. The district court held that Wells Fargo had waived its right to arbitrate by failing to move to compel arbitration until after extensive discovery and litigation proceedings. Wells Fargo appealed that decision to the Eleventh Circuit and lost. Garcia v. Wachovia Corp., 699 F.3d 1273 (11th Cir. 2012).

After remand to the district court, the plaintiffs moved for class certification. Wells Fargo opposed that motion on grounds including lack of numerosity, because the unnamed class members had entered into arbitration agreements requiring individual arbitration. Wells Fargo also filed a conditional motion to compel arbitration as to the unnamed class members. The district court denied the arbitration motion, without ruling on class certification. Wells Fargo again appealed. The Eleventh Circuit, in an opinion by Judge Tjoflat, held that the district court lacked jurisdiction to rule on whether the unnamed class members were required to arbitrate and vacated the district court’s order. In re Checking Account Overdraft Litig., 780 F.3d 1031 (11th Cir. 2015).

Unsurprisingly given its prior rulings, on remand the district court granted the class certification motion. Wells Fargo then moved to compel arbitration as to the unnamed class members. The district court denied that motion on the ground of waiver of arbitration through prior litigation. Wells Fargo appealed for a third time, and this time scored a major victory. In his opinion for the court, Judge Tjoflat first pointed out that a party asserting waiver of arbitration faces a heavy burden of proof. To establish waiver requires a showing that the party seeking arbitration has “substantially invoked the litigation machinery” prior to seeking arbitration and that the opposing party has in some way been prejudiced. The court observed that “the key ingredient in the waiver analysis is fair notice to the opposing party and the District Court of a party’s arbitration rights and its intent to exercise them.” The court held that, even though Wells Fargo had waived its arbitration rights as to the named class representatives, it had consistently reserved all its arbitration rights against unnamed class members. The court also noted that “it would have been impossible in practice to compel arbitration against speculative plaintiffs and jurisdictionally impossible for the District Court to rule on those motions before the class was certified.” The court rejected the argument that, to avoid waiver, filing a conditional motion to compel was required much earlier in the litigation, because the district court would lack jurisdiction over such a motion until the class was certified.

]]>FLSA Opt-Ins Become Party Plaintiffs Upon Filing Written Consentshttps://www.11thCircuitBusinessBlog.com/2018/04/flsa-opt-ins-become-party-plaintiffs-upon-filing-written-consents/
Mon, 23 Apr 2018 12:39:59 +0000https://www.11thCircuitBusinessBlog.com/?p=1581In Mickles v. Country Club Inc., 2018 WL 1835316 (11th Cir. Apr. 18, 2018), the Eleventh Circuit held, considering a question of first impression in any circuit, that filing a written consent to proceed as a party plaintiff in an FLSA collective action confers party plaintiff status on the filer, even if no collective action is certified.

Mickles filed her complaint in April 2014, alleging that Country Club had improperly classified her and other similarly situated employees as independent contractors. Over the next few months, three other employees, Houston, McAllister, and Lemon, filed written consents to become plaintiffs. After that, discovery began and the district court entered a scheduling order requiring that all motions, with a few exceptions, be filed within 30 days of the beginning of discovery. The exceptions did not include motions to certify the collective action, and Mickles failed to file her motion for conditional certification until May 2015, well past the deadline. The district court denied the certification motion as untimely.

Country Club filed a motion to clarify the order denying conditional certification, asking whether Houston, McAllister, and Lemon, who had filed written consents back in 2014, were still parties to the case. The district court granted the motion to clarify and stated Houston, McAllister, and Lemon had never been party plaintiffs because they had never been adjudicated to be similarly situated to Mickles. Shortly thereafter, Mickles and Country Club settled Mickles’s claims, and the district court approved the settlement. Houston, McAllister, and Lemon filed a notice of appeal, seeking to appeal the order denying conditional certification, the clarification order, and the order approving the Mickles settlement.

The Eleventh Circuit, in an opinion written by Judge Black and joined by Judge Wilson and Judge Schlesinger visiting from the Middle District of Florida, first confirmed its appellate jurisdiction, in an analysis overlapping with its consideration of the merits. Houston, McAllister, and Lemon, the court held, were parties to the action with standing to appeal. The court noted that the FLSA provision providing the opt-in mechanism, 29 U.S.C. § 216(b), includes two requirements: that the named plaintiff file on behalf of herself and “other employees ‘similarly situated,’” which Mickles had done, and that other employees seeking to opt in file a “consent in writing to become . . . a party,” which Houston, McAllister, and Lemon had done. Acknowledging that Hipp v. Liberty National Life Insurance Co., 252 F.3d 1208 (11th Cir. 2001), contemplates a two-stage approach in making a similarly-situated determination—under the Hipp framework, conditional certification prompts notice to potential class members, which may be followed by a motion to decertify—the court noted that “nothing in our circuit precedent requires district courts to use this approach.” The Hipp approach is an “effective tool” for managing FLSA cases, but conditional certification is not necessary for an opt-in plaintiff to obtain party status: “[C]onditional certification is solely for notice purposes and does nothing to determine if a party becomes a plaintiff. . . . [T]he opt-in plaintiffs remain party plaintiffs until the district court determines they are not similarly situated and dismisses them.” So Houston, McAllister, and Lemon were parties with standing to appeal. And their appeal was timely, because the order approving the Mickles settlement was the only final order in the case; the clarification order did not dismiss the appellants’ claims but instead held that they had never been parties in the first place.

Having confirmed its jurisdiction, the court found no abuse of discretion in the district court’s denial of the motion for conditional certification as untimely. But the district court erred in holding in its clarification order that Houston, McAllister, and Lemon were not parties, and this had the effect, if the three were not entitled to have the statute of limitations tolled, of dismissing their claims with prejudice. The Eleventh Circuit vacated the clarification order and remanded the case with instructions to dismiss the appellants’ individual claims without prejudice or to go forward with their three individual claims. The court also held that the three “are entitled to statutory tolling of their claims beginning on the dates they filed their written consents.”

]]>False Claims Act Statute of Limitations Extendedhttps://www.11thCircuitBusinessBlog.com/2018/04/false-claims-act-statute-of-limitations-extended/
Wed, 18 Apr 2018 00:57:01 +0000https://www.11thCircuitBusinessBlog.com/?p=1576An extended limitations period—up to ten years, in some circumstances—is applicable to actions by private plaintiffs under the False Claims Act (FCA) even when the government declines to intervene, according to a recent Eleventh Circuit decision, United States ex rel. Hunt v. Cochise Consultancy, Inc., 2018 WL 1736788 (11th Cir. Apr. 11, 2018). In so holding, the court staked out a position on a contentious statutory provision that embodies a more expansive view of FCA liability than other circuits that have considered the issue.

A little background is in order. The FCA is intended to root out fraud by government contractors. Actions under the FCA can be brought by the Attorney General, or by a private party—known as a “relator”—on behalf of the United States. When a relator brings a suit on behalf of the United States (known as a qui tam action), he or she must notify the government, which may elect to take over the action (often referred to as “intervening”). If the government does not take over the action, the relator may proceed alone. A successful relator is entitled to a percentage of the recovery.

In Hunt, the relator had worked for an army contractor in Iraq. The relator alleged that in 2006 the contractor awarded a subcontract after receiving bribes—costing the United States several million dollars more than it would have paid under the most competitive bid. In 2010, the FBI interviewed the relator about a separate kickback scheme (for which he later served jail time). During this interview, he told agents about the 2006 fraud. In 2013, after his release from prison and within three years of his 2010 interview, the relator filed the qui tam action. The United States declined to intervene.

The FCA has a bifurcated limitations provision. Actions must be brought within “6 years after the date [of] the violation,” 31 U.S.C. § 3731(b)(1), or within “3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after . . . the violation,” id. § 3731(b)(2).

Because more than six years had passed since the alleged fraud, the action was untimely under section 3731(b)(1). But (on the facts alleged in the complaint) the action would be timely under section 3731(b)(2), because the relator had filed within three years of revealing the relevant facts to government officials and within ten years of the underlying events. The district court dismissed the case, however, holding that section 3731(b)(2) is inapplicable when the government declines to intervene or (in the alternative), if section 3731(b)(2) did apply, then the three-year period began to run when the relator learned of the fraud.

The Eleventh Circuit reversed. Writing for the court, Judge Jill Pryor reasoned simply that nothing in the text of the statute excludes non-intervened cases from the limitations period set out in section 3731(b)(2). The defendants—relying on decisions from other circuits—argued that allowing the relator to take advantage of section 3731(b)(2) in non-intervened cases would produce an absurd result. See United States ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F.3d 288, 293–94 (4th Cir. 2008); United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 726 (10th Cir. 2006). The court held that it was not absurd to peg the limitations period to the knowledge of the United States (a non-party) because the United States remained the real party in interest with a significant financial stake in the litigation, powers of supervision, and the possibility of intervention.

Similarly, the court relied on the statute’s plain language to conclude that the relevant knowledge in determining the limitations period under section 3731(b)(2) was not that of the relator, but that of “the official of the United States charged with responsibility to act in the circumstances.” In so doing, the court rejected—as unsupported by the statutory text—the approach of the Ninth Circuit, which had adopted the legal fiction that a relator suing on behalf of the United States was effectively an agent of the government. SeeUnited States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217 & n.8 (9th Cir. 1996).

]]>GEORGIA SUPREME COURT JUSTICE BRITT GRANT NOMINATED TO ELEVENTH CIRCUIThttps://www.11thCircuitBusinessBlog.com/2018/04/georgia-supreme-court-justice-britt-grant-nominated-to-eleventh-circuit/
Wed, 11 Apr 2018 20:03:54 +0000https://www.11thCircuitBusinessBlog.com/?p=1570The White House announced yesterday the nomination of Georgia Supreme Court Justice Britt Grant to fill the seat on the Eleventh Circuit opened by the pending retirement of Judge Julie Carnes. Justice Grant has served on the Supreme Court for a year and three months. She was appointed to the Court by Governor Nathan Deal after serving as Georgia’s Solicitor General for a year. She previously worked in various positions in the George W. Bush administration. If confirmed, she would be the Eleventh Circuit’s youngest judge. Justice Grant would be President Trump’s third appointment to the Eleventh Circuit.

]]>Judge Julie Carnes to take Senior Status, Opening Seat on Eleventh Circuithttps://www.11thCircuitBusinessBlog.com/2018/04/judge-julie-carnes-to-take-senior-status-opening-seat-on-eleventh-circuit/
Mon, 02 Apr 2018 16:14:21 +0000https://www.11thCircuitBusinessBlog.com/?p=1565After serving as an active federal judge for more than a quarter-century, Eleventh Circuit Judge Julie Carnes announced last week that she will take senior status effective June 18, 2018.

Judge Carnes has spent her entire career in public service. Following graduation from the University of Georgia Law School in 1975, Judge Carnes clerked for Judge Lewis R. Morgan on the United States Court of Appeals for the Fifth Circuit. Thereafter, she worked as Assistant United States Attorney, eventually becoming the Appellate Chief of the Criminal Division. In 1992, President George H.W. Bush appointed Judge Carnes to the United States District Court for the Northern District of Georgia, where she presided until President Obama nominated her to join the Eleventh Circuit in 2014.

Judge Carnes’ decision to take senior status will give President Trump his third appointment to the Eleventh Circuit. Less than two months ago, the Senate confirmed the President’s second nominee–former Georgia Court of Appeals Judge Elizabeth Branch. Kevin Newsom, the President’s first nominee, has been on the bench since August of last year.

]]>Forfeited Deposit Not Capital Gain in Real Estate Dealhttps://www.11thCircuitBusinessBlog.com/2018/03/forfeited-deposit-not-capital-gain-in-real-estate-deal/
Thu, 15 Mar 2018 19:05:18 +0000https://www.11thCircuitBusinessBlog.com/?p=1561In a case of first impression, the Eleventh Circuit affirmed that a taxpayer could not treat as long-term capital gain its retention of a nonrefundable deposit after a would-be buyer defaulted on an agreement to purchase real property used in the taxpayer’s trade or business. CRI-Leslie, LLC v. Comm’r, 882 F.3d 1026 (11th Cir. 2018).

Under the facts of the case, the taxpayer, CRI-Leslie LLC, entered into an agreement to sell real property used in CRI-Leslie’s trade or business for $39.2 million, $9.7 million of which was paid immediately to CRI-Leslie as a nonrefundable deposit. The deal ultimately fell through, and the would-be buyer forfeited the $9.7 million deposit. CRI-Leslie treated its retention of the forfeited deposit as a long-term capital gain for federal income tax purposes. The Internal Revenue Service determined, and the U.S. Tax Court agreed, that CRI-Leslie improperly treated its retention of the forfeited deposit as long-term capital gain, rather than ordinary income.

The Internal Revenue Code of 1986, as amended, generally provides for more favorable tax rates on “net capital gain” than it does on ordinary income. Net capital gain is “the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year.” Long-term capital gain, in turn, is “gain from the sale or exchange of a capital asset held for more than 1 year.”

Section 1221(a) defines “capital asset” as “property held by the taxpayer (whether or not connected with his trade or business)” but explicitly excludes “property, used in [the taxpayer’s] trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in [the taxpayer’s] trade or business.” (emphasis added.)

CRI-Leslie and the IRS stipulated that CRI-Leslie’s real property was real property used in CRI-Leslie’s trade or business within the meaning of section 1221(a). Accordingly, CRI-Leslie conceded that its real property was not a capital asset as defined in section 1221. Even so, if the sale of CRI-Leslie’s real property had been completed, the gain from the sale would have nevertheless been treated as long-term capital gain under a different Code provision—namely, section 1231. Very generally, under section 1231, if a taxpayer recognizes gain from the sale or exchange of real property that is used in a trade or business and held for more than one year, the gain is eligible to be treated as long-term capital gain. But since the sale did not occur, the treatment of CRI-Leslie’s retention of the forfeited deposit depended on the application of yet another Code provision, section 1234A. Code section 1234A generally treats the gain or loss arising from the cancellation of an agreement to buy or sell property as a gain or loss from the sale of a capital asset, provided the property at issue qualifies as a capital asset.

Because section 1234A applies only to property that is a “capital asset,” the issue before the Eleventh Circuit was whether CRI-Leslie’s real property was a capital asset in CRI-Leslie’s hands for purposes of section 1234A. The Eleventh Circuit determined that the definition of capital asset in section 1221, by its terms, is controlling for purposes of Subtitle A of the Code, which includes section 1234A. Consequently, based on the Code’s plain language, and based on CRI-Leslie’s concession that its real property was not a capital asset under section 1221(a), the Eleventh Circuit concluded that section 1234A did not apply and thus that CRI-Leslie’s retention of the forfeited deposit constituted ordinary income to CRI-Leslie.

CRI-Leslie argued that disallowing capital gains treatment of a cancelled sale of real property used in the taxpayer’s trade or business unjustly rewarded passive investors while penalizing investors who managed the property they planned to sell. Moreover, the disallowance created an “absurd” result in which the forfeited deposit was ordinary income if the sale was cancelled but long-term capital gain if the sale was completed. Such an approach, CRI-Leslie argued, created two disparate rates for the same economic transaction. CRI-Leslie further cited to legislative history accompanying amendments to section 1234A in 1997, which, according to CRI-Leslie, supported that Congress intended section 1234A to apply to property outside of the section 1221 definition of capital asset—and in particular to include trade or business property subject to section 1231.

The Eleventh Circuit was not persuaded. According to the court, “if an asset is Section-1231 property, then by definition—literally—it is not Section-1234A property.” In concluding his opinion for the court, Judge Kevin Newsom observed: “Now it may well be, as CRI-Leslie asserts, that Congress really did mean for the amended Section 1234A to reach beyond ‘capital assets’ as defined in Section 1221 to include Section-1231 property. Perhaps, that is, Congress just stubbed its toe between the hearing room and the House and Senate floors. Even so, it’s not our place or prerogative to bandage the resulting wound. . . . If Congress thinks that we’ve misapprehended its true intent—or, more accurately, that the language that it enacted in [Code sections] 1221 and 1234A inaccurately reflects its true intent—then it can and should say so by amending the Code.” The opinion is Judge Newsom’s second tax case in his short tenure on the court.

]]>Judge Branch Confirmed to Courthttps://www.11thCircuitBusinessBlog.com/2018/03/judge-branch-confirmed-to-court/
Thu, 01 Mar 2018 19:41:03 +0000https://www.11thCircuitBusinessBlog.com/?p=1558The U.S. Senate on Tuesday confirmed Georgia Court of Appeals Judge Elizabeth “Lisa” Branch to sit on the Eleventh Circuit, with a vote of 73 to 23. Judge Branch was nominated to the court by President Trump in September 2017, and has served on the Georgia Court of Appeals since 2012.

]]>Third Time No Charm for Bank in Arbitration Bidhttps://www.11thCircuitBusinessBlog.com/2018/02/third-time-no-charm-for-bank-in-arbitration-bid/
Tue, 20 Feb 2018 00:40:14 +0000https://www.11thCircuitBusinessBlog.com/?p=1555In its third trip to the Eleventh Circuit attempting to enforce an arbitration agreement in a would-be class action involving bank debit card overdraft practices, the bank’s motion to compel arbitration was again denied, this time because of what the court concluded was a failure to agree on arbitration. Dasher v. RBC Bank (USA), 2018 WL 832855 (11th Cir. Feb. 13, 2018).

The saga began with an attempt by the bank, at the outset of the litigation, to enforce an arbitration provision in a 2008 customer account agreement. The district court denied that motion, but the denial was vacated on appeal and remanded for reconsideration in light of AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).

After that remand, and an acquisition of the original bank, RBC, by PNC Bank, PNC renewed the motion to compel arbitration. But the account holder successfully argued that a 2012 superseding agreement was binding, and it lacked an arbitration provision. PNC promptly issued an amendment to the agreement effective February 1, 2013, which included arguably retroactive language applying to the account holder’s pending claim. The account holder, Dasher, did not opt out of that agreement. On appeal to the Eleventh Circuit, the second order denying arbitration was affirmed on the basis of the applicability of the 2012 agreement, the one without the arbitration provision.

After remand, PNC moved to compel on the basis of the February 2013 agreement. Dasher argued that PNC had waived the right to arbitrate by failing to raise it earlier. The district court denied the motion to compel arbitration, once again on the basis of waiver. On appeal, the Eleventh Circuit did not reach the waiver issue, but relied on a contradiction between Dasher’s resistance in court to arbitration and the bank’s claim that he had acceded to arbitration by failing to opt out of the proposed amendment. The court relied heavily on the fact that Dasher was represented by counsel, but counsel was not notified of the proposed new 2013 agreement. The court did not find any unethical conduct by PNC’s counsel. To the contrary, the court intoned “[q]uite simply, we do not intend to write an ethics opinion.” The court also rejected PNC’s argument that filing of an amended complaint was sufficient to trigger a new right to arbitrate. The court found that the amended complaint actually included a narrower definition of the proposed classes.

]]>En Banc Reminder: Even Self-Serving and Uncorroborated Affidavits Can Preclude Summary Judgmenthttps://www.11thCircuitBusinessBlog.com/2018/02/en-banc-reminder-even-self-serving-and-uncorroborated-affidavits-can-preclude-summary-judgment/
Sun, 04 Feb 2018 18:09:08 +0000https://www.11thCircuitBusinessBlog.com/?p=1548On January 31, 2018, the full Eleventh Circuit held “that an affidavit which satisfies Rule 56 of the Federal Rules of Civil Procedure may create an issue of material fact and preclude summary judgment even if it is self-serving and uncorroborated.” United States v. Stein, 2018 WL 635960 (11th Cir. Jan 31, 2018) (en banc). The court treated the case as an opportunity to bring its tax precedent back into line, but the broader holding applies to all summary-judgment cases.

The Stein case involved federal tax assessments. The Government had obtained a summary judgment for back taxes, interest, and late penalties against a taxpayer—despite her “unwavering contention” in an opposing affidavit that the amounts owed had already been paid, “to the best of [her] recollection.” An Eleventh Circuit panel initially affirmed that judgment because under Mays v. United States, 763 F.2d 1295, 1297 (11th Cir. 1985), a taxpayer’s claim (in that case, for a refund) “must be substantiated by something other than . . . self-serving statements.” But two of the three panel members (Judge Adalberto Jordan and Judge William Pryor) concurred with an opinion calling for Mays to be overruled.

After taking the case en banc, the Eleventh Circuit did overrule Mays insofar as the case had suggested that a taxpayer’s self-serving and uncorroborated affidavit cannot create an issue of material fact with respect to the correctness of a tax assessment. Now writing for the full court, Judge Jordan explained that even though an affidavit “cannot be conclusory, . . . nothing in Rule 56 (or, for that matter, in the Federal Rules of Civil Procedure) prohibits an affidavit from being self-serving.” Regardless of whether the claims at issue concern federal taxes, “a litigant’s self-serving statements based on personal knowledge or observation can defeat summary judgment.” And any corroboration requirements “must come from a source other than Rule 56, such as the substantive law that governs the parties’ dispute or the Federal Rules of Evidence.”

Judge William Pryor (who was previously reported to have been considered as a potential Supreme Court nominee) joined the court’s opinion but also wrote separately “to highlight the irony of our earlier precedent when viewed in the light of the history of the Seventh Amendment” because “the denial of the right to a jury in tax cases [was] a chief complaint animating the American Revolution.”

]]>Presumption Against Extraterritoriality Applied to Alien Tort Statute in Jurisdictional Dispute over Folk Singer’s Deathhttps://www.11thCircuitBusinessBlog.com/2018/02/presumption-against-extraterritoriality-applied-to-alien-tort-statute-in-jurisdictional-dispute-over-folk-singers-death/
Thu, 01 Feb 2018 23:09:37 +0000https://www.11thCircuitBusinessBlog.com/?p=1546A popular Chilean folk singer named Víctor Jara was tortured and killed in the wake of the 1973 military coup that toppled Salvador Allende’s government and brought Augusto Pinochet to power. Nearly 40 years later, Jara’s family discovered that his suspected killer, a former Chilean military officer named Pedro Pablo Barrientos Núñez, had moved to Florida and become a U.S. citizen. Barrientos refused to leave the country to face murder charges in Chile, so Jara’s family sued him in federal district court under the Alien Tort Statute, 28 U.S.C. § 1350, and the Torture Victim Protection Act of 1991, Pub. L. No. 102-256, 106 Stat. 73 (1992).

Although the Jaras obtained a $28-million jury verdict against Barrientos on their statutory claims under the Torture Act, the district court dismissed their common-law claims under the Alien Tort Statute for lack of subject-matter jurisdiction. Unlike the Torture Act (which supports its own, federal-question claims), the Alien Tort Statute does not provide an independent cause of action. It only gives district courts “original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. § 1350. After considering the Jaras’ allegations, the district court dismissed claims premised on jurisdiction under the Alien Tort Statute because regardless of Barrientos’s U.S. citizenship, his tortious conduct took place entirely outside the United States.

The Jaras appealed (Barrientos did not), and the Eleventh Circuit affirmed the dismissal of their tort claims in Jara v. Barrientos Núñez, 878 F.3d 1268 (11th Cir. 2018). In an opinion by Judge William Pryor, the court held “that the district court correctly dismissed the Jaras’ claims that invoked the Alien Tort Statute because Barrientos’s relevant conduct occurred exclusively in Chile and a defendant must have engaged in relevant conduct on American soil before a claim carries sufficient force to displace the presumption against extraterritorial application.”

The Supreme Court has held that a claim must “touch and concern the territory of the United States . . . with sufficient force to displace the presumption against extraterritorial application” before a district court can exercise jurisdiction under the Alien Tort Statute. Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 124–25 (2013). Given that holding, and despite arguments that dismissing some of the claims against Barrientos would give him a “safe harbor” in the United States, Judge Pryor explained that the Alien Tort Statute does not confer subject-matter jurisdiction over “the foreign torts of American corporations and citizens.”

]]>Be Careful What You Wish For—Eleventh Circuit Rejects Argument That Appellant’s Own Requested Jury Charge Requires Reversalhttps://www.11thCircuitBusinessBlog.com/2018/01/be-careful-what-you-wish-for-eleventh-circuit-rejects-argument-that-appellants-own-requested-jury-charge-requires-reversal/
Wed, 31 Jan 2018 19:40:30 +0000https://www.11thCircuitBusinessBlog.com/?p=1542In Smith v. R.J. Reynolds Tobacco Co., 2018 WL 549141 (11th Cir. Jan. 25, 2018), an Engle progeny tobacco case, the Eleventh Circuit rejected the defendant’s argument that the jury’s compensatory damages award should be reduced based on comparative fault. The relevant legal question was settled last month, when the Florida Supreme Court clarified in Schoeff v. R.J. Reynolds Tobacco Co., 2017 WL 6379591 (Fla. Dec. 14, 2017), that a defendant found liable for both intentional and non-intentional tort claims is not entitled to a reduction in compensatory damages. But the parties’ proposed jury instructions and their arguments at trial—which took place before the Schoeff decision was issued—figure prominently in the Eleventh Circuit’s resolution of the Smith appeal.

Smith asserted claims against R.J. Reynolds for both intentional torts and “non-intentional” negligence and strict liability, all based on smoking-related injuries suffered by his late wife. At the time of trial, the question whether comparative fault could be applied to a verdict finding liability for both intentional and non-intentional torts under Florida law was unsettled. Smith acknowledged in his argument to the jury that it should consider his wife’s negligence in choosing to smoke, and should attribute an appropriate percentage of fault to her. But Smith’s requested jury charges included an instruction to the effect that Mrs. Smith’s own negligence would reduce the recovery on only some, but not all, claims.

The defendant, which had argued throughout the case that a comparative negligence finding would reduce compensatory damages on all claims, objected to any instruction suggesting that damages awarded for some claims might not be reduced. Instead, the defendant requested an instruction that damages would be reduced based on Mrs. Smith’s percentage of fault, without distinction among the plaintiff’s claims. At the charge conference, Smith expressed his concern that his agreement to the defendant’s requested charge might be construed as a waiver of his argument that there should be no reduction if the defendant were found liable for an intentional tort. The defendant “assured the [district] court and Smith that Defendant would not later argue waiver simply because Smith did not object to Defendant’s requested instruction.” The instruction was given, and the jury assigned a negligence percentage to Mrs. Smith and found the defendant liable on all the plaintiff’s claims. The district court denied the defendant’s request to reduce the jury’s compensatory damages award, rejecting the argument that Smith had waived his right to oppose reduction of damages if the defendant were found liable for an intentional tort.

The Eleventh Circuit, in an opinion written by Judge Julie Carnes and joined by Judges Martin and Anderson, affirmed. Noting that “[w]aiver is the voluntary, intentional relinquishment of a known right,” the court found no waiver by Smith of the right to oppose reduction of the damages award: “It is difficult to conclude that a litigant who has consistently proclaimed his opposition to apportionment of fault on an intentional tort claim has somehow waived his right to later maintain that position as to the entry of the judgment.” This was unaffected by Smith’s acknowledgement of fault before the jury, given that non-intentional tort claims were also in the case. And the defendant, the court said, had missed its chance to object to Smith’s jury argument, anyway: “Had Smith affirmatively misled the jury as to the law in his summation—which he did not do—it was up to Defendant to object to object and for the court to correct any misrepresentation. There was no objection and no correction.”

The court also rejected the defendant’s argument that the award should be reduced because the district court had (at the defendant’s request) instructed the jury (incorrectly, it turns out) that the damages award would be reduced based on its apportionment of negligence to Mrs. Smith. “On these specific facts, where it was Defendant who had prompted the incorrect instruction—rejecting an instruction that would have better protected it—Defendant would at most be entitled to a new trial on the question of damages.” But the defendant never requested a new trial, and the court found no basis on which it could reduce the damages award in violation of Florida law. “Accordingly, we conclude on the facts of this case that the district court’s repudiation of its own charge to the jury concerning the reduction of damages does not justify a reversal of its ultimate decision not to reduce those damages.”

Southern Trust told its customers that it would invest their money in precious metals, and could also lend them money for the investments. But Southern Trust did not actually trade in metals. Instead, Southern Trust’s CEO, Robert Escobio, opened accounts in two foreign futures brokerages under the name of Southern Trust’s parent company, Loreley Overseas Corporation, and invested Southern Trust’s customers’ money in metals futures—something Southern Trust couldn’t do directly, because it was not registered with the U.S. Commodity Futures Trading Commission (“CFTC”), as a trader in futures is required to be. Neither of the foreign brokerages was making loans to Loreley or charging any interest, but Southern Trust nevertheless charged “interest” to its own customers.

After receiving a customer complaint, the National Futures Association, a private self-regulatory agency, opened an investigation of Southern Trust. The NFA action ended in a settlement, but the CFTC also filed an action against Southern Trust, Escobio, and Loreley, alleging that the defendants failed to register as futures commission merchants, transacted in futures outside of a registered exchange, and promised their customers investments in metals but invested their money in futures instead. After a bench trial, the district court entered judgment in the CFTC’s favor on all claims, enjoined the defendants from trading in commodities, and awarded restitution to investors.

The Eleventh Circuit affirmed, except for one piece of the restitution award, which it remanded for consideration of other potential equitable remedies. The opinion, written by Judge Gilman visiting from the Sixth Circuit and joined by Judges Jordan and Hull, began by rejecting the defendants’ argument that the CFTC’s claims were barred, as a matter of equitable estoppel, by the defendants’ settlement with the NFA. The court noted that it is debatable whether equitable estoppel can ever be applied against the government, at least absent “affirmative misconduct” by the government, and joined the other circuits to have addressed the issue to hold that a settlement with a nongovernmental regulatory agency does not preclude subsequent claims by a governmental regulator.

The court also affirmed the district court’s conclusion that the defendants had violated 7 U.S.C. §§ 6b(a) and 9, and 17 C.F.R. § 180.1, which together prohibit fraud or deception in connection with the sale of futures contracts and include the same three elements: (1) a misrepresentation, misleading statement, or deceptive omission; (2) scienter; and (3) materiality. As to the first element, the court contrasted references in customer-facing documents to “physical metals” with the reality of Loreley’s investments, never disclosed to customers, in futures. As for scienter, the court recited the relevant standard—“highly unreasonable omissions or misrepresentations . . . that present a danger of misleading [customers] which is either known to the Defendant or so obvious that Defendant must have been aware of it”—and found that Escobio’s involvement in the scheme, paired with his industry experience, met the standard. As to the third element, materiality, the court agreed with the district court that a reasonable investor would consider the differences between metals and futures, not to mention those between a loan and the absence of one, material.

The court also affirmed the injunction prohibiting any of the defendants from working in the commodities-trading industry. Reciting the factors set forth in SEC v. Carriba Air, Inc., 681 F.2d 1318 (11th Cir. 1982), to guide the determination “whether the defendant’s past conduct indicates that there is a reasonable likelihood of further violations in the future,” the court rejected Escobio’s argument that his cooperation with the NFA required that the injunction be vacated. (That cooperation may have been offered, the court noted, “as a self-interested effort to strike a favorable deal[.]”)

But the court vacated the restitution award in favor of a group of Southern Trust investors who intended to invest in futures (rather than metals) but were misled into believing that Southern Trust was properly registered to effect those investments. The district court had employed a “reasonably foreseeable result” standard in determining that the defendants’ not being registered proximately caused those investors’ losses, citing the Eleventh Circuit’s decision in City of Miami v. Bank of America Corp., 800 F.3d 1262, 1282 (11th Cir. 2015). But that decision, the Eleventh Circuit noted, was later reversed, Bank of America Corp. v. City of Miami, 137 S. Ct. 1296 (2017). The proper standard “surely demands more than foreseeability alone.” Applying “the common-law rules . . . [which] include the notion that proximate cause encompasses cause in fact, requiring proof of ‘but-for’ causation,” the Eleventh Circuit found reversible error in the conclusion that the defendants’ lack of registration caused the losses suffered by investors who intended to trade in futures. But the court affirmed the separate restitution award to those investors who thought they were investing in metals rather than futures, and remanded the case for consideration of other potential equitable remedies, including disgorgement, for the investors who were led to believe that they were investing in futures with a registered broker.

This dispute concerned a transfer of bonds. Cita, a Swiss trust, had contracted with Fifth Third, a U.S. bank, for Fifth Third to take custody of certain bonds purportedly valued at $428 million. For reasons that neither party saw fit to inform the court, Fifth Third transferred the bonds back to their original issuer. (They were soon thereafter delisted from the London Stock Exchange.) Cita sued Fifth Third over the transfer, claiming breach of contract, breach of fiduciary duty, and negligence.

Fifth Third moved to dismiss the complaint, pointing out that it was filed outside the one-year time limit imposed by the contract. In response, Cita (which did not deny that it was notified of the transfer more than a year before it filed suit) argued that the limitation it had signed was unconscionable. In one sentence of the conclusion of its response—and nowhere else—Cita also requested that if the court dismissed the complaint, it should be without prejudice so that Cita could amend.

Although the Eleventh Circuit rarely finds itself applying Ohio law, it should come as no surprise that the court—in an opinion authored by Judge Stanley Marcus—held that the clear one-year limitations provision agreed to by sophisticated parties was valid and enforceable under the law of that state.

More significantly for Eleventh Circuit litigants, the court also demonstrated its enforcement of procedural requirements, holding that the trial court had not abused its discretion in denying leave to amend the complaint. Although the Federal Rules require trial courts to “freely give” leave to amend when justice requires, the Eleventh Circuit will not reverse a trial court if the plaintiff does not “properly move” for such leave in a separate motion laying out the substance of the proposed amendments. SeeLong v. Satz, 181 F.3d 1275, 1279 (11th Cir. 1999). Additionally, Cita’s various arguments for tolling the contractual limitations period were waived because the arguments had not been raised before the district court and (as usual) none of the very narrow circumstances that excuse such waiver were present.

]]>Court Limits Right to Cure Improper “Shotgun” Pleadingshttps://www.11thCircuitBusinessBlog.com/2018/01/court-limits-right-to-cure-improper-shotgun-pleadings/
Tue, 09 Jan 2018 00:55:57 +0000https://www.11thCircuitBusinessBlog.com/?p=1520The term “shotgun pleading” refers to a complaint that, for one reason or other, fails to give the defendants adequate notice of the claims against them. In the Eleventh Circuit, courts have identified roughly four categories of shotgun pleadings: (1) a pleading with multiple counts where each count adopts the allegations of all preceding counts; (2) a pleading that relies on conclusory and vague allegations not tied to any cause of action; (3) a pleading that fails to separate out its various causes of action and claims for relief; and (4) a pleading that asserts numerous claims against multiple defendants without specifying which defendants are responsible for which acts or omissions. Weiland v. Palm Beach Cty. Sheriff’s Office, 792 F.3d 1313, 1321–23 (11th Cir. 2015). By their very nature, shotgun pleadings violate Rule 8’s mandate to provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8.

In Vibe Micro, Inc. v. Shabanets, 2018 WL 268849 (11th Cir. Jan. 3, 2018), the court blasted another shotgun pleading. Edward Mandel sued various parties alleging he was the victim of a scheme to force him off the board of a bill-payment terminal company. Mr. Mandel’s complaint asserted both federal and state law claims, spanned 49 pages, and included an additional 109 pages of exhibits. Shortly after filing, Mr. Mandel amended his complaint as a matter of right, adding even more allegations and exhibits. On motions to dismiss by the various defendants, the district court (S.D. Fla.) found the amended complaint to be a shotgun pleading that was “a mostly incoherent document” riddled with allegations “oftentimes not connected to a particular Defendant or set of Defendants, making it impossible to understand who did what.” Although Mr. Mandel did not request the opportunity to amend his pleading, the district court sua sponte granted him the opportunity to do so, providing specific guidance as to how to remedy the deficiencies in the amended complaint. Mr. Mandel then filed a second amended complaint, which “ballooned to 70 pages, with 160 pages of exhibits.” The district court, finding the second amended complaint was plagued by the same issues underlying the first amended complaint, dismissed the case with prejudice for violating Rule 8’s requirement to provide “a short and plain statement of the claim.” Mr. Mandel did not request—and the district court did not offer—the opportunity to file another amended pleading.

On appeal, Mr. Mandel acknowledged that the second amended complaint was a shotgun pleading, but argued the district court can never dismiss a pleading with prejudice on Rule 8 shotgun pleading grounds unless it finds evidence of bad faith. In an opinion authored by Judge Chuck Wilson, the Eleventh Circuit disagreed, ultimately concluding that “[w]hen a litigant files a shotgun pleading, is represented by counsel, and fails to request leave to amend, a district court must sua sponte give him one chance to replead before dismissing his case with prejudice on non-merits shotgun pleading grounds.” (emphasis added). Because Mr. Mandel was represented by counsel and had been given an opportunity to amend his shotgun complaint, the Eleventh Circuit held it was appropriate for the district court to dismiss Mr. Mandel’s claims with prejudice under Rule 8 without providing an additional opportunity to amend. The court did not consider whether the same rule would apply in the context of a pro se plaintiff. Id. Further, the court remanded the case “for the limited purpose of clarifying that the dismissal of the state law claims is without prejudice” (citing Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 & n.7 (1988)) (holding that, when a district court declines to exercise supplemental jurisdiction over state-law claims, it should dismiss those claims without prejudice).

Judge Adalberto Jordan wrote the Eleventh Circuit’s original and revised opinions in the case, and he specially concurred in the denial of rehearing en banc. Doubling down on the rationale of those earlier opinions, Judge Jordan explained that although “mutable” characteristics and stereotypes may be “legally relevant” to a claim of intentional discrimination, “a plaintiff must still ground her disparate-treatment claim on one of the protected Title VII categories, which [precedent] tells us are immutable.” 2017 WL 6015378, at *2. The EEOC had not pursued “a disparate-impact claim, which considers whether one group of people is disproportionately affected by a facially-neutral policy.” Id. at *4. And if “the future of Title VII” is to “reduce the concept of race . . . to little more than subjective notions of cultural appropriation,” he wrote, “Congress is the proper entity through which to effect such significant change.” Id. at *5.

Judge Beverly Martin dissented. In an opinion joined by Judges Robin Rosenbaum and Jill Pryor, Judge Martin wrote that the case concerned a “false racial stereotype” about “the natural texture of black hair.” 2017 WL 6015378, at *5. She also argued that “an immutable-trait requirement has no place in the race-discrimination context” because the “supposed distinction between an ‘immutable’ racial trait and a ‘mutable’ one is illusory.” Id. at *9, *10. Instead, she reasoned, “[w]hat matters is whether that trait is linked, by stereotype, to a protected category,” and a “ban on ‘all’ applicants with dreadlocks is about as race-neutral as a ban on ‘all’ applicants with dark-colored skin.” Id. at *11, *14.

The latest chapter in the CMS case is significant not only because it involved, as Judge Martin put it, a “debate between two appeals court judges, neither of [them] African American, about what is an immutable characteristic of African American hair.” 2017 WL 6015378, at *11. The case also revealed a split on anti-discrimination law among four of the five judges appointed to the Eleventh Circuit by President Barack Obama. (The fifth Obama appointee, Judge Julie Carnes, did not publicly take a side, but she presumably voted with Judge Jordan and the majority to deny the petition.)

]]>Bankruptcy Debtors Can Recover Attorneys’ Fees Spent in Enforcing Stay and Seeking Damages, Including for Appealshttps://www.11thCircuitBusinessBlog.com/2017/12/bankruptcy-debtors-can-recover-attorneys-fees-spent-in-enforcing-stay-and-seeking-damages-including-for-appeals/
Tue, 12 Dec 2017 00:01:51 +0000https://www.11thCircuitBusinessBlog.com/?p=1514Richard and Patricia Horne filed for bankruptcy protection under Chapter 7 of the Bankruptcy Code. After the bankruptcy was filed and the automatic stay imposed by Section 362(a)(1) went into effect, Mary Mantiply, an attorney, filed a state court action against the Hornes on behalf of Mantiply’s client. Mantiply repeatedly refused to dismiss the case, even after being informed of the bankruptcy and the stay. The Hornes filed a motion in the bankruptcy court seeking damages for Mantiply’s violation of the automatic stay, relying on 11 U.S.C. § 362(k)(1), which provides (subject to an inapplicable exception) that “an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.” The bankruptcy court granted the Hornes’ motion and awarded them damages, including attorneys’ fees. Mantiply appealed to the district court, which affirmed and added additional fees incurred by the Hornes on appeal. Then Mantiply appealed to the Eleventh Circuit, sought the bankruptcy judge’s recusal, and ultimately filed a petition for certiorari in the Supreme Court, all without success. During the initial trip to the Eleventh Circuit, the Hornes filed a motion seeking to recover the additional fees they incurred in the appellate proceedings. The court transferred the motion to the district court, which granted it. Mantiply (you’ll never guess) appealed. Mantiply v. Horne (In re Horne), 2017 WL 6002508 (11th Cir. Dec. 5, 2017).

Mantiply argued that § 362(k)(1) allows recovery only of fees incurred in ending a violation of the automatic stay, and not those incurred in pursuing a damages award or in related appellate proceedings. She cited Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. ___, 135 S. Ct. 2158 (2015), in which the Court held that Section 330(a)(1) of the Bankruptcy Code, which allows attorneys performing work for a bankruptcy estate to apply for reasonable compensation, does not permit those attorneys to recover fees they incur in defending a fee award on appeal. Fees incurred in defending a Section 330(a)(1) award are not incurred in service rendered to a bankruptcy estate, and thus fall outside Section 330(a)(1) (which is not, the Court observed, a “fee-shifting” statute). So in ASARCO, the usual “American Rule”—under which each side pays its own fees—applied.

Mantiply argued that the American Rule and ASARCO required the Hornes’ fee award to include only fees incurred to end the stay violation, not those incurred in seeking damages for the violation or on appeal. The Eleventh Circuit, in an opinion written by Judge May visiting from the Northern District of Georgia and joined by Judge Black and Chief Judge Carnes, noted that it was an issue of first impression for the court and rejected Mantiply’s argument. The American Rule, the court noted, applies only in the absence of “explicit statutory authority” to shift fees—authority provided, in Mantiply’s case, by Section 362(k)(1). That provision, unlike the provision at issue in ASARCO, “specifically and explicitly contemplates at least some departure from the American Rule by including ‘costs and attorneys’ fees’ in the damages due to an individual injured by a willful violation of an automatic bankruptcy stay”—costs which otherwise would be drawn from the limited fund available to the debtor’s creditors.

The text of Section 362(k)(1) provides no basis to exclude fees expended in seeking damages or on appeal; indeed, the Eleventh Circuit had already held, in In re Rosenberg, 779 F.3d 1254 (11th Cir. 2015), that another fee-shifting provision in the Bankruptcy Code, Section 303(i)(1), applies to fees incurred on appeal. Thus the court joined the Ninth Circuit in holding that the fees recoverable under Section 362(k)(1) are not limited to those incurred in stopping a stay violation—“[t]his explicit, specific, and broad language permits the recovery of attorneys’ fees incurred in stopping the stay violation, prosecuting a damages action, and defending those judgments on appeal.”

The Eleventh Circuit also rejected Mantiply’s claims that the Hornes were not entitled to recover their fees because of an alleged failure to comply with appellate rules (by incorporating arguments and documents by reference) and by their failure to file their retainer agreement along with their attorney’s billing statements.